SS futures rose, driving up stainless steel mills' futures prices, while spot offers increased, yet transactions await follow-through. [SMM Stainless Steel Daily Review]

SMM December 5 - SS futures showed a strengthening and upward probing trend. Today, driven by the overall strengthening of the metal futures, SS futures probed higher, with the night session reaching as high as 12,575 yuan/mt on Friday. However, under the still weak fundamentals, there was resistance to the rise, and it pulled back to 12,510 yuan/mt near the close. In the spot market, under the influence of the strengthening SS futures, market activity was moderate before noon. With major large stainless steel mills raising their prices, traders also increased their quotes. However, market confidence has not fully recovered, and the acceptance of high prices is limited, resulting in few actual transactions.

The most-traded SS futures contract held up well. At 10:30 am, SS2601 was at 12,525 yuan/mt, up 20 yuan/mt from the previous trading day. In Wuxi, the spot premiums and discounts for 304/2B were in the range of 345-545 yuan/mt. In the spot market, Wuxi cold-rolled 201/2B coils were quoted at 8,000 yuan/mt; cold-rolled 304/2B coils with trimmed edges, averaged 12,800 yuan/mt in Wuxi and 12,800 yuan/mt in Foshan; Wuxi cold-rolled 316L/2B coils were at 23,775 yuan/mt, and Foshan at 23,775 yuan/mt; hot-rolled 316L/NO.1 coils in Wuxi were at 23,000 yuan/mt; and both Wuxi and Foshan cold-rolled 430/2B coils were at 7,600 yuan/mt.

Recently, against the backdrop of increasing expectations for US Fed interest rate cuts, the overall metal futures have shown a stronger trend. The SS futures, influenced by SHFE nickel and ferrous metals futures, and stimulated by recent news of production cuts at stainless steel mills, saw some recovery in market confidence. Moreover, after the futures price had fallen to its lowest level since 2020, further declines faced some resistance, leading to a stop falling and rebound recently. However, given the relatively weak fundamentals of stainless steel, the upward momentum is insufficient, limiting the overall increase.

Driven by the strengthening of SS futures, the spot transaction situation improved somewhat. At the beginning of the week, inquiries and transactions increased significantly. The market transaction situation is still largely influenced by the change in futures. There was a clear phase of restocking by downstream buyers. However, the pessimistic sentiment in the stainless steel market has not dissipated. With continuously declining costs and low confidence in year-end demand, after the short-term macro tailwinds are released, the cautious market mentality remains strong, and transactions may again become sluggish, making it difficult for actual transaction prices to rise significantly. From the production side, although frequent news of production cuts at stainless steel mills was reported earlier, the actual reduction in November was only 1.79%, to 3.394 million mt. Although production is expected to decrease further in December, given that current inventory has not accumulated significantly and raw material prices have dropped, reducing cost pressure on stainless steel mills, the actual implementation of production cut plans still needs to be closely watched. At the year-end, domestic policies primarily focus on stability, the positive impact of the US Fed's interest rate cuts on the market has been gradually digested, and the likelihood of further strong favorable policies from a macro perspective is low. Additionally, as raw material prices pull back, cost support weakens, and although stainless steel prices are already at relatively low levels, there remains a possibility of a slight drop.